The price of saving Old Town Hall

Elizabeth Kim

Published 1:41 pm, Sunday, January 6, 2013

Jacquelyn Dunster, Jonathan Krackehl and Ed Massena of It's Relevent at work in their office in Old Town Hall in Stamford, Conn. on Monday December 3, 2012.
Photo: Dru Nadler

Jacquelyn Dunster, Jonathan Krackehl and Ed Massena of It's...

Barry Schwimmer and Peter Propp work of Stamford Inovation Center work at Old Town Hall in Stamford, Conn.on Monday December 3, 2012.
Photo: Dru Nadler

Barry Schwimmer and Peter Propp work of Stamford Inovation Center...

Hugh Brownstone, nephew Jordan Hadas and sister Susie Hadas's company Pretty Cool, Inc opened it's office at Old Town Hall in Stamford, Conn. and are photographed on Monday December 3, 2012.
Photo: Dru Nadler

STAMFORD -- Last spring, after a highly touted but complicated $15 million renovation completed in 2010, the tortured saga of Old Town Hall seemed finally to lurch toward a conclusion. Following roughly two years of on-and-off talks with city officials, a business incubator called the Stamford Innovation Center agreed on a 10-year lease deal for 16,000 square feet, which accounted for the majority of the building's rentable space. The deal capped off a decades-long pursuit not only to finance the rebuilding of a prominent city landmark, but also to make the investment pay. Over the next 10 years, rents from the Stamford Innovation Center are expected to total $2.7 million.

But while Old Town Hall may be finally back in business, the remaking of the beloved Beaux Arts building on Atlantic Street has come at an escalating price that has been far greater than city officials anticipated.

In the absence of a significant rental stream, the Old Town Hall Redevelopment Agency, which is charged with managing the building, has relied on the city to cover deficits. As a result, the project, which carries a $10.2 million debt service from redevelopment costs, has racked up millions of dollars in additional operating and capital shortfalls.

According to the city's financial reports, a total of $4.1 million in taxpayer dollars have gone to Old Town Hall since 2010.

That number will grow. Even though the building is now occupied, Old Town Hall is expected to stay in the red in the near future, with a more than $200,000 deficit estimated for 2013. Because the company agreed to pay for its own fit-up costs, the Stamford Innovation Center will only start paying rent in the middle of 2014. According to the most recent city projections, Old Town Hall will not break even before 2015. In 2016, the city is conservatively estimating the building to yield a slim profit of $16,000 after its operating expenses of $361,168 are paid.

Legal woes have added an unforeseen financial liability. In Dec. 2011, the principal contractor of Old Town Hall filed a lawsuit charging that the city owed the company more than $2 million in unpaid work and resulting damages. The city has contested the claim, but the case does not appear to be close to being resolved. The city's June 2012 financial report noted that it was "too early to evaluate the likelihood of success or potential exposure to the City."

Critics have pounced on the project's difficulties as an example of the city over-reaching.

"Why would we be in the rental business?" said Kathleen Murphy, an Independent on Stamford's Board of Finance. "We got into speculative real estate as a municipal government. We put a lot of money into it and we continue to put a lot of money into it."

Renee Kahn, a city preservationist and historian, has throughout bemoaned a missed opportunity with the project. During the mid-nineties, she worked with a committee on a proposal that involved renting the building to various artists groups as well as seniors. The plan was similar to what Greenwich did with its own Old Town Hall, and according to Kahn, it was financially feasible.

"At one time, it could have been done simply," Kahn said. "The chance was lost and we're stuck with something that's a headache."

Even Mayor Michael Pavia conceded that the city was suffering consequences of a redevelopment that was "put together during an entirely different real estate market and with an entirely different way of thinking."

"Today, I doubt very much if you'd want to put together a package like that," Pavia said.

He added: "Would the project be a lot less ambitious today? Absolutely."

Back in 2008, the Malloy administration decided to forge ahead with the restoration of Old Town Hall based on an auspicious development: after years of searching, the city had finally found what seemed to be an ideal tenant. National Realty and Development Corp., a developer which owns Lord & Taylor, had in 2007 tentatively agreed to terms on a 25-year lease that would pay the city $4 million over the first 10 years alone.

The financing plan to rebuild Old Town Hall was $20 million in total, accounting for a $15 million renovation as well as an additional $5 million the city had spent in repairs going back to 2001. Of that $20 million, $6 million were to come from federal tax credits, $6.4 million from state grants, and approximately $8 million from the city.

Although the math seemed simple, the scheme behind it was complex. To facilitate the receipt of the tax credits, the city created three limited liability corporations and sold the building to one of them, a move that wound up creating confusion during Pavia's administration. Up until the end of 2011, the city's former legal affairs director, Michael Larobina, maintained that Old Town Hall was its own legal entity and that the city was not responsible for the building. OTHRA officials, which are made up of various city stakeholders appointed by the mayor, balked at the claim, saying that the agency was created as a public entity to serve the city's development interests. In the end, the city backed them up, stating in a 2010 financial report that, "As long as OTHRA is not generating sufficient rental income to cover its operating costs and debt service requirements, the City, through Old Town Hall Manager, Inc., is responsible for covering these costs."

The conclusion had profound implications; by May 2009, the deal with National Realty Development Corp. had collapsed. Construction, meanwhile, had been already underway for more than a year.

With a commercial vacancy rate approaching 25 percent, finding a new tenant proved to be a formidable challenge.

"The instruction from the then-mayor (Malloy) was that the building should stand on its own feet but we didn't plan on the dip of the economy that occurred which was unexpected but unfortunate," said Tim Curtin, OTHRA's chairman.

He added: "In this environment, there was nobody out there."

On top of the weak office market, the very features of Old Town Hall that made the building so prized were what also made it exceedingly hard to rent.

"In modern parlance, it is an inefficient building," said Laure Aubuchon, the city's economic development director. She said the building has a 40 percent "loss factor," resulting from dramatic architectural elements like high sweeping ceilings and long contiguous spaces that cannot draw rent but still incur maintenance expenses.

"What makes that building so gorgeous is what contributes to its loss factor," she said.

Nevertheless, inquiries for Old Town Hall did trickle in. Aside from the Stamford Innovation Center, city officials met with two museums -- the Wadsworth Atheneum Museum of Art, which expressed interest in setting up a satellite branch in Stamford, and Stepping Stones Museum for Children in Norwalk. But timing was a factor as well as questions about whether the building had enough wall space to exhibit art pieces. A number of law firms toured the building, as well as one investment bank. According to Pavia, the city was at one point close to reaching a lease deal with a private art collector, but the individual's failure to secure tax credits made it a no-go.

As the project has become vulnerable to indictment, OTHRA officials have sought to stress the bigger picture: under a plan that had overwhelming support from the city's Board of Representatives, the agency took a once decaying, non-contributing property and turned it into an appreciable asset with the potential to produce revenues. The thinking has always been that over time Old Town Hall "would go from a white elephant to a pretty positive investment for the city," Curtin said.

Although there is no formal agreement in place, Aubuchon described city money spent on the project as a loan. "The numbers are very transparent," she said. "Nobody is hiding the peanut."

But when the money will be recouped is not clear. Moreover, any rents earned after expenses and debt service payments were always supposed to go to the city.

For now, city and OTHRA officials are resting their hopes on the Stamford Innovation Center. The privately held incubator, which benefited from a $500,000 loan from the state Department of Economic and Community Development, moved in late November, joining Sikorsky Aircraft, a helicopter manufacturer that happens also to be one of its corporate sponsors, It's Relevant, a media company specializing in local news websites, and The Ballet School of Stamford. The company has set its goals on creating an entrepreneurial hub, providing advice, space, as well as possible capital to start-up ventures. It will make money largely by renting out space and hosting events. Existing tenants Sikorsky and It's Relevant have been assigned as sub-leasers. In November, a fledgling consumer product company, Personally Cool, joined them by renting a small office on the second floor.

If everything goes according to plan, the incubator has the potential to grow the city's economy. As start-ups outgrow space in Old Town Hall, the hope is that they take up a vacant office in the downtown, Aubuchon said.

As planned, the public has been granted access to portions of the first floor that have been designated for art exhibitions. But during off-peak hours, those same spaces are also available for rent either by individuals or corporations. For $1,000, a Stamford resident can throw a party set amid stately surroundings that include 10-foot-high windows, marble-painted columns, an iron-wrought winding staircase, and Depression-era murals depicting key moments in the city's history. In the back, the hulking transparent addition known as the "glass sail" provides a tweak on the building's neoclassical design as well as views of the busy hub around Columbus Park.

Despite the fact that the groundwork was laid in prior years, the administration has been a faithful cheerleader for Old Town Hall, however short it falls of the bottom line.

"A mothballed building of high architecture and historic significance has been restored to its former beauty," Pavia said, when asked to assess the project. "It is an asset in every sense of the word."